Uber, the largest ride-sharing company in the United States and in many countries around the world, agreed to settle two class-action lawsuits Friday that sought to reclassify drivers as actual employees. Currently, Uber counts drivers as independent contractors, which saves money in the process because it does not have to provide benefits that are required by law for actual employees. After more than two years of litigation, the company reached an agreement with drivers in California and Massachusetts, where the suits were brought to preserve this contractor status but bring significant changes. A judge in San Francisco must approve the agreement.
If the terms are approved, there will be multiple changes to the way Uber operates. First, Uber will pay the plaintiffs in the case $84 million, with additional payments if Uber goes public. Second, Uber will no longer deactivate drivers who decline rides while logged into the app. Third, Uber will create a driver’s association to facilitate discussions over drivers’ issues, with an appeals process put in place to deal with these issues, Vox reported. Finally, Uber will clarify its policy regarding tipping, allowing drivers to post signs in their cars saying that tips are not included in the fare.
As anyone who uses Uber knows, one of its biggest features is the cashless nature of the transaction. If you were to take a taxi, you would need to remember to bring cash and decide how much to tip the driver. Until now, Uber simplified the process, charging credit cards once the trip was completed and not requiring tips. For those of us who no longer carry cash on a regular basis, this court ruling could endanger our Uber ratings. The thinking is that if a rider does not tip his or her driver, they will not receive the full five stars, bringing down their rating and making their rides less attractive for future drivers.
Lyft, Uber’s biggest competitor, has allowed in-app tipping a long time. However, the nature of this feature allows for Lyft to remain cashless. Uber has said that it will not add a tipping feature to the app.
For what it is worth, tipping will have to become part of the “Uber culture” because Uber has so thoroughly trained its users that a tip is not required. As someone who is a seasoned Uber user, the changes to the tipping policy are a disappointment. What makes Uber great is its cashless transactions, and if tipping becomes the norm, Uber will lose this advantage over its rivals.
At the same time, I understand that Uber is squeezing its drivers with even lower rates, and that they should be fairly compensated for their very important service. The simple solution would be for Uber to copy Lyft and add tipping to its app, but with such a feature already ruled out, it looks like Uber is about to lose many customers.